Rich Hamptons Buyers Don't Want Mega-Mansions

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This content was published on August 11, 2017 10:55 AMAug 11, 2017 - 10:55

(Bloomberg) -- After what felt like an endless stagnant market, mansion sales in the Hamptons have finally shown signs of life. “We’re coming out of a really down market,” said Beate Moore, a broker for Sotheby’s International Realty. “It was very frustrating. But the market has picked up, and we’ve seen a surge of huge sales.”

The numbers, as reported last month, back it up— this year’s second quarter saw 48 home sales priced at $5 million or higher, the most activity in almost a year and a half, according to a report by Miller Samuel Inc. and Douglas Elliman Real Estate.

Now that wealthy second home buyers are returning to the southern tip of Long Island, they have noticeably different criteria than their predecessors of 10 or even five years ago. Prices might be the same or even higher than before, brokers said, but the needs of an often younger, less-showy buying set have changed.

Bigger Isn’t Better

One of the pronounced differences in taste has to do with scale. Drive through the Hamptons today and you’ll see mega-mansions built over the last 20 years or so, many with dozens of roof lines and such a variety of windows that it appears owners were given a catalogue and asked for “one of each.” Echoing a trend already evident in places like Greenwich, CT, these monoliths have fallen from favor.

“Those great big huge houses from the 1990s and early 2000s, they’re sitting,” said Paul Brennan, a Bridgehampton-based broker at Douglas Elliman Real Estate. “I think that conspicuous consumption isn’t in vogue these days, and that’s why bigger isn’t better.”

He continues, “The taste is: ‘I want it now, and I don’t want it huge,’ and those substantial houses haven’t come down in price enough to either knock them down or renovate them to a certain standard.”

Taste aside, it’s also about recognizing that mega-mansions aren’t always the most fun to live in.

“I think there’s a different awareness,” said Moore, of Sotheby’s. “If you have a really large family, with grandchildren and staff, of course you want to accommodate everyone graciously.” When a house is too large, though, “that almost suggests an alienation factor between families, where everybody is in their own wing.”

A final factor is ease of use: People who spend $20 million on a house want a vacation home, not a headache.

“If you have a house that’s easy to maintain, obviously you don’t have to put as much time and money and energy into maintaining it,” said Debbie Brenneman, a broker with the Corcoran Group.

Smaller, she added, is a relative term as well. “If you go from 13,000 to 8,000 square feet, it’s still a large home.”

Bells and Whistles, Minus the Tennis Court

People might be buying smaller houses, but that doesn’t mean that they’re skimping on luxury. “The bells and whistles are inside the houses,” said Brennan. “There’s no lack of that.”

Buyers of houses— even ones fronting the ocean—want to have pools, while “smart” homes filled with tech, elaborate outdoor seating areas, and homes with so-called “flexible” layouts (meaning they’re open plan, rather than having dedicated dining, living, and entertaining rooms) are in vogue.

Brennan points to the home theater as emblematic of the trend.

“Before, everyone’s theater had to be bigger than the next,” he said. “Now they’re doing flex-rooms, where the screen can come down, but when it’s up, it can be a rec room for the kids.”

Tennis courts, once considered a beacon of the blue-blooded life, have also fallen from favor.

“It’s not an imperative for most people,” Moore said. And even when it is, buyers soon find that it’s more for show than regular use. “Some people still seem to like the fact that they could at least put a tennis court on the property,” Brennan said. “But they don’t use it.”

Getting a Deal

Multiple Hamptons brokers asserted that “buyers want value.”

What “value” means in a zip code that ranks amongst the most expensive in the country is a matter of some debate, but generally, it seems that brokers quantify it via three qualities: location, construction quality, and potential for flipping and turning a profit.

Location, unsurprisingly given that this is a beach destination, is about proximity to the ocean.

“That’s what people come out here for,” said Moore. “You want to be as close as you can afford.” This week, Moore listed a 5,000-square-foot house on the beach for $55 million.

Construction quality, she said, varies widely in the area. You can build something for a thousand dollars a square foot or more, she said, but you can also build it for a lot less. “The poorly slapped-together spec houses with more quantity than quality are just getting very little play.”

When it comes to the final test of value, it’s not as much about the price of the house as the perception that the buyer is getting a deal. “There are still people who are willing to do the work,” said Brenneman. “They’ll buy something, come in, and fix it up.”

Many people, though, want to “walk in with their toothbrush,” countered Brennan. “That’s one end of the spectrum, but those houses aren’t flying off the shelf.”

The houses that are? Ones that—newly renovated or not—have been heavily discounted.

“Primarily, people are buying houses that have come down in price from their initial ask by probably 25 to 50 percent,” he said. “That’s what’s selling.”

What It Will Cost You

“The base price of houses somehow keeps going up and up,” said Moore. For a house that’s a close walk or bike ride to the beach, built well, sized appropriately, and stocked with a pool, “you have to assume $8 million plus,” she said.